4 Steps to Maximize Your Executive Compensation
With their many moving parts, compensation plans come with many possible options and decisions. Making the right moves at the right time can mean a big difference in your bottom line.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

Executive compensation plans have become increasingly complex over the past decade, with companies seeking the right balance of guaranteed vs. performance-based pay to appease both stakeholders and company leaders. Today’s compensation plans may include a combination of a base salary, annual incentives, long-term incentives, equity, benefits, severance and more.
Unfortunately, the demands of their jobs rarely allow executives the time to continually monitor and manage their accounts and make informed decisions that will maximize their pay.
As compensation structures continue to evolve, the need for executives to lean on advisers to understand their options and put a strategic plan in place will only increase. There are four fundamental elements that should be central to any planning strategy.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Recognize and manage exposure to your company
Companies want their executives invested for the long term — a holdover mindset resulting from the dot-com era, when flexible stock options encouraged tech execs to boost their company’s share price long enough to vest their personal shares.
Today, it’s common for a significant portion of an executive’s compensation package to be tied to equity or long-term performance awards. There has been a noticeable shift toward restricted stock, which distributes compensation according to a vesting plan often tied to length of time with the company or performance milestones.
Additionally, many executives will surpass holding requirements and elect to invest even further to show long-term confidence in their company. And while it is important to portray assurance in the firm’s future and leadership, it’s critical to take a step back and diversify your own portfolio. Examine your financials through the lens of key life events — marriage, retirement, children attending school — to develop a strategy that will provide both regular cash flow and an appropriate payout for retirement.
Actively monitor and manage your plan
Maintaining a clear and accurate view of your vested assets is essential for long-term planning. If your stock awards are on a vesting schedule over a five-year period, where 20% vests each year, it can be easy to take a “set it and forget it” approach. But it’s important to sit down annually to revisit how much of your stock has vested, how much is unvested, the value of that stock and the future tax consequences.
This is also a good time to evaluate where you stand in relation to any holding requirements. For example, if you are locked into a holding requirement at the time your stock vests, and are therefore unable to sell your stock to meet the tax liability of those awards, you’ll need to have a plan to cover those taxes with available cash.
Optimize your deferred compensation payout
It’s important to weigh both tax strategies and cash flow needs when determining how your deferred income should be distributed. Mapping out your anticipated income in retirement is the first step.
Take the example of an executive in his early 60s. He has significant savings and six months to go until retirement. He has been contributing to a deferred compensation plan for many years and has the option to withdraw in a lump sum, over 10 years, over 15 years, or more.
Our executive will begin receiving his required minimum distributions from his retirement account at age 70.5. Once he hits that point, his RMDs will provide ample cash flow. In order to maintain a consistent lifestyle throughout his retirement, he can bridge the gap between his income and his RMDs by distributing funds from his deferred compensation plan over the next nine years, which would provide ample cash flow.
Connect the various parts of your financial life
By working with a financial adviser with expertise in executive compensation, you can unite all components of your complex financial life. An experienced adviser will start a relationship with your company’s financial and benefits reps to ensure you can see how your entire compensation package comes together.
However, too many executives wait until they are nearing retirement to seek out an adviser. In many cases, they may make elections on the payout of their pension or retirement plan without understanding the entire picture — which impacts their cash flow, tax liability and ultimately their desired lifestyle in retirement.
By engaging a financial adviser early in their career or at least several years in advance of retirement, executives can maximize their compensation package and better plan for their future.
This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
Grant Rawdin is Founder and CEO of Wescott Financial Advisory Group LLC (opens in new tab). He founded the firm in 1987, which grew from the tax, business and estate services he provided to clients at Duane Morris LLP, a venerable AMLaw 100 law firm. Grant is an attorney, an accountant and a Certified Financial Planner™ and has served as adviser to many businesses, providing strategic, ongoing, and M&A advice. Grant and Wescott are recognized as leading the investment and financial planning industry in innovation, growth and size.
-
-
Being Rich vs. Being Wealthy: What’s the Difference?
It’s all about where you put the zeros — having a large bank account isn’t the same as having zero regrets and focusing on what brings you joy.
By Andrew Rosen, CFP®, CEP • Published
-
Stock Market Today: Stocks Close Higher in Volatile Session
The major indexes spent most of Thursday in rally mode, but selling pressure emerged in afternoon trading.
By Karee Venema • Published
-
Being Rich vs. Being Wealthy: What’s the Difference?
It’s all about where you put the zeros — having a large bank account isn’t the same as having zero regrets and focusing on what brings you joy.
By Andrew Rosen, CFP®, CEP • Published
-
3% Mortgage Rates: Gift of a Lifetime or Low-Rate House Arrest?
A homeowner planning to relocate or downsize might find the higher costs related to higher mortgage rates too much of a hurdle to clear. What are their options?
By Adam Jordan, CIMA®, AAMS® • Published
-
I Wish I May, I Wish I Might: Estate Planning’s Gentle Nudge
Contrary to what you might expect, using precatory language such as ‘I wish’ or ‘I hope’ can play an important part in three estate planning objectives.
By Allison L. Lee, Esq. • Published
-
Donor-Advised Funds: A Tax-Savvy Way to Rebalance Your Portfolio
Long-term investors who embrace charitable giving can easily save on capital gains taxes by donating shares when it’s time to get their portfolio back in balance.
By Adam Nash • Published
-
Five Investment Strategies to Focus on in 2023
Planning instead of predicting, reducing allocations of illiquid assets and having a diversified portfolio are good ways for investors to play defense this year.
By Don Calcagni, CFP® • Published
-
Investors Nearing Retirement Show Patience With Markets
Despite last year’s upheaval, many investors are sticking with long-term plans and tightening their budgets instead of moving money out of stocks and bonds.
By Matthew Sommer, Ph.D. CFA® • Published
-
Long-Term Care Planning vs. Taxes: Finding a Healthy Balance
Many families discover that trying to mitigate the cost of long-term care can conflict with another common retirement concern — reducing taxes for retirees and their heirs.
By John M. Graves, Esq., IAR, Agent • Published
-
For a Concentrated Stock Position, Ask Your Adviser This
There can be advantages to having a lot of stock in one company, but ‘de-risking’ can help avoid some significant disadvantages.
By Robert Gorman • Published